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Real Estate

 

Foreign Ownership of Land

By virtue of the provisions of a treaty giving the right to own immovable property, subject to the provisions of The Land Code and subject also to limitations on rights over land for religious purposes, foreigners are allowed to acquire for residence, commerce, industry, agriculture, burial, public charity, or religion under the conditions and procedures prescribed in ministerial regulations and with the permission of the Minister.

 Government policy generally does not allow foreigners to own land.  However, the Land Code permits non-Thai individuals or companies to own land by virtue of treaty provisions or ministerial permission,. Foreigners may now own up to one rai (1,600 square meters) of land for residential use, subject to the permission from the Ministry of Interior and Ministerial regulations. Foreign land ownership exceptions are made for businesses with Board of Investment promotion privileges, oil concessions under the Petroleum Act, businesses located in certain industrial estate, with respect to areas of land needed to conduct the business in question.

 It is possible for a company with non-Thai shareholders to own land, provided that not more than 49% of the company is owned by foreigners. Significant penalties may be imposed on any person found to have acquired land as an agent of a foreign person or company. These penalties include a fine not exceeding Baht 20,000 or up to two years’ imprisonment.

 Foreign Ownership of Condominiums

Subject to certain ministerial regulations, foreigners may own up to 49% of a condominium or up to 100% of a condominium located on a plot of common land not larger than five rai.

 With certain exceptions relating to person with resident status and companies meeting certain conditions, the Condominium Act B.E. 2535 (1992) provides that a foreign individual or juristic person who intends to purchase a condominium must remit foreign currency into the country (or withdraw Baht or foreign currency from their non–resident account) in an amount not less than the condominium price. Proof of these remittances must be shown to the Land Department at the time of the registration of a transfer of ownership of the condominium unit(s).

 Alternatives to Land Ownership for Foreigners

Given the restrictions on the outright ownership of land, foreigners sometimes employ alternative forms of land or building tenure. Forms such as lease, and the Roman law concepts of usufruct or superficies are provided for in the Civil and Commercial Code “CCC”. Unlike the Land Code, the CCC does not distinguish between foreigners and Thai nationals.

 Leases

A lease allows the use of the land and buildings for a maximum term of 30 years. In order to be enforceable, any lease for period longer than three (3) years must be registered.  This involves payment of a registration fee and stamp duty based on a percentage of the rental fee for the whole lease term. The original registered lease remains in full force and effect with respect to the property even if there is a change in ownership of the land. The parties can contractually agree to renewals, but this right cannot be registered and is not effective against a purchaser of the property.

The lessee can only use the property for the purposes stated in the lease and cannot sublease, sell, transfer interest, modify, or improve the property without the lessor’s permission.

 Usufruct Interest

A usufruct interest gives temporary ownership rights to things on or arising from the land, and the right to enjoy products of the land, such as crops from a field or rock from a quarry, but does not confer ownership of the land itself. In practice, a usufruct is limited to 30 years.  Similar to lease, the agreement can be successively renewed. In contrast to a lease, a usufructuary interest can be sold or transferred, although it expires upon the death of the holder and therefore cannot be inherited. Any use is allowed (except destruction) even without the land owner’s permission. The usufructuary is responsible for routine maintenance and must insure the property for the benefit of the owner. If the property is destroyed, then the usufruct is extinguished. However, the usufruct will be revived to the extent to which the owner restores the land. Upon its return to the owner, the property must be substantially unaltered from its original condition.

 Superficies

A superficies is similar to a usufruct, but provides more security for the interest of the holder of the rights. A superficiary has the right to own, on or under the land, buildings structures or plantations, but not the land itself. A renewable 30-year maximum term applies. Unlike usufruct, a superficies is both transferable and transmissible by way of inheritance. Further, a superficies is not extinguished by the destruction of the buildings, structures or plantations. The superficiary has the right to remove the buildings, structures, or plantations upon the expiry of the superficies, at market value. As with a usufruct, the land must be restored to its former condition before being returned to the owner.

 Leasing Immovable Property for Industrial and Commercial Purposes

The nature and the needs of a given business determine which of the various tenures is most appropriate for a foreign enterprise. In addition, the Act on the Leasing of Immovable Property for Industrial and Commercial Purpose allows the leasing of immovable property for a period of more than 30 years, but not more than 50 years, provided the lease is for industrial or commercial purposes. Such a lease is also subject to certain conditions, which are prescribed in ministerial regulations.

 

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